Fuel price hike to push inflation into double-digit: Rangarajan

New Delhi: Describing the government’s decision to raise prices of diesel, cooking gas and kerosene as inevitable, the Prime Minister’s economic advisor said that it would push inflation into the double-digit zone.

“Due to the hike, inflation could be close to 10% by July,” Prime Minister’s Economic Advisory Council (PMEAC) chairman C. Rangarajan said.

However, he added, the inflation numbers would subside after the initial surge. “I do expect that after initial correction, inflation will come down to 6.5% by March 2012,” Rangarajan said.

The decision to raise fuel prices, he said, was inevitable in view of the rising crude prices in the global market and its impact on the fiscal deficit. “Since correction was needed in order to contain fiscal deficit, the move is welcome.”

On 24 June, the government hiked the price of diesel by Rs3 a litre, kerosene - Rs2 a litre and cooking gas by a steep Rs50 a cylinder. This followed the hike of over Rs5 per litre on petrol announced in mid-May.

The overall inflation was 9.06% in May, up from 8.66% in April. The Reserve Bank of India had recently said that it expects inflationary pressure to remain high, at an average of 9% till September on account of high global commodity prices.

The PMEAC chief’s views found support from other experts and economists.